Lateness and deductions from pay

Is anything in writing?

Many employers have something in their contracts to the effect that if an employee is going to be absent, or late, that they must contact their manager by a specified time. So far, so good. Unfortunately, it’s unusual to go on to say that if they are late, that the employer has the right to deduct an amount of pay equivalent to the lost time, e.g. 15 minutes late means 15 minutes less pay. But even if there is such a term in the contract, you may not be able to rely on it unless certain steps have been taken. So let’s look at what the law says about deductions from pay.

Authorised deductions

The Employment Rights Act 1996 states that an employer can only make a deduction from pay where: (1) it is required or authorised by statute; (2) there is a provision in the contract or; (3) the employee has given their written agreement to the deduction in advance of it being made. But what does this mean in practice?

Legal requirement. Deductions authorised or required by law covers payments such as NI, PAYE or Child Support Agency orders. These deductions have to be made by the employer and the employee has no choice in the matter!

Contract term. The second situation concerns contractual terms that relate to deductions. There are conditions attached to these, which the employer must satisfy: (1) the employee must have been given, in writing, a copy of any terms relating to deductions before they can be made; and (2) the employer must have also written to the employee explaining the effect of the term before making a deduction. In other words, if there’s a right to deduct pay in the contract, but it’s not been explained in writing to the employee prior to it being made, then it will be unlawful. An example of this would be reducing the final salary payment of an employee who is leaving having exceeded their holiday entitlement. If the contract doesn’t include a term allowing a deduction in these circumstances, it can’t be made.

Tip. If you’re paying for expensive training or relocating an employee to another area, always have a written agreement in place that gives you the right to recover all, or part, of these costs from the employee if they leave.

Written consent

Finally, the employee can give their written consent in advance of a deduction being made. Do be careful with this one as you can’t deduct money and then ask the employee to sign a document authorising it after the event. If consent is given afterwards it won’t be valid and can’t be relied on.

What’s the answer?

So let’s go back to deducting pay for lateness. Is there a clause in the contract allowing this or, if not, did the employee agree to the deduction in advance of it being made? If the answer to both these is “no”, any deduction from the employee’s pay will be unlawful and they will be entitled to ask a tribunal to order a full repayment. Amend your contracts to include a right to deduct pay for poor timekeeping.